Ayala adopts sustainability as new business strategy

MANILA, Philippines – The Ayala Group of Companies is making significant adjustments to its strategies, business models, products, and operations as it adopts a new way of doing business in a way that puts sustainability above profit-making.

In order for a business to be relevant to society, Ayala Corp. chairman and CEO Jaime Augusto Zobel de Ayala said it has to go beyond measuring its success based on the traditional metrics like financial statements and balance sheets.

Ayala said this would require looking at the bigger picture, as well as the social and environmental impact of the business, instead of just the economic front, meaning profits, capital expenditure, taxes, and employment.

But one does not have to take from the other, Ayala pointed out.

“Being a responsible company does not mean that it will be a financial disaster,” he said.

Ayala stressed that sustainability would be as important to the Ayala Group.

This new standard of sustainability in business is being adopted for the first time in the Philippines and is just starting globally, he said.

Growth, he added, is not the only agenda for business.

“Sustainability on the one hand offers a win-win solution,” Ayala said.

While adopting sustainability as a business strategy is more about their belief on how the Ayala Group should do business, he pointed out that there is new idealism in the air, with more young people looking for institutions that match their ideas.

“Soon, these young people will be the one doing the investing. There will be more and more demand for these things. Even customers are demanding responsible behavior from companies. Right now, it is being driven internally but over time, all our constituents will be demanding higher standards,” Ayala said.

Ayala revealed that in his recent visit to the Harvard Business School, he discovered that a majority of the graduates are seeking opportunities in social entrepreneurship rather than in finance and investment banking.

While this new approach may limit their choices on what businesses to pursue, Ayala admitted new opportunities are cropping up.

“Now, we are wrestling a lot when it comes to our business decisions. When the business is something that is not sustainable environmentally, chances are high, about 98 percent that we will not go into it. We will not put the reputation of the company at risk,” he said.

Because of this new view, the Ayala group has taken on microfinance as a new business, instead of limiting itself to banking.

Ayala said this new approach would catch on, even though government does not mandate it.

“The average Filipino manager is one who wants to be a positive force in society,” he said.

On Nov. 10, the business group is holding a sustainability summit to provide direction and additional impetus for its companies to discuss ways by which their businesses can address urgent sustainability issues.

About 250 key leaders in the Ayala group as well as a group of local and international resource speakers would share their experience and expertise.

In July, the Ayala group committee adopted a policy for sustainable business that committed to increase sustainability impact in the area of operations by reducing energy, water, and solid waste footprint and moving beyond compliance towards global standards on environmental and social responsibility.

These include environmental parameters in accrediting suppliers and enabling communities as well as providing opportunities for entrepreneurs; considering lower environmental impact during product development, among others.

Ayala Corp. president and chief operations officer Fernando Zobel de Ayala, for his part, explained that while their corporate social responsibility (CSR) initiatives in the past were more oriented towards philanthropy and charitable contributions, this time, the CSR activities will have a sustainable business model attached to them.

“In the past, CSR was more about giving small amounts but we are not making a difference. The challenge is how to start bringing CSR into our business mode,” he said.

The emerging developmental model in business, he pointed out, goes beyond governance and transparency and is more on the footprint or the impact of the business on society, the environment, and the future.

Ayala revealed that what opened their eyes to the opportunities present in business sustainability is their water business, Manila Water Co.

“It was an opportunity to move into an industry that was inefficient but very critical. The business serves some of the poorest communities. This is an example of a business that is going to people not being served in the past. And now, we are giving more of the business contracts… such as making street signs or painting jobs, to the communities rather than to our traditional suppliers,” he said.

This year, the six publicly listed companies in the Ayala Group – Ayala Corp., Ayala Land, Cebu Holdings, Bank of the Philippine Islands, Globe Telecom, and Manila Water, published reports utilizing the Global Reporting Initiative (GRI)) sustainability reporting guidelines.

This is the first time that a Philippine conglomerate has published this kind of report for itself and all of its main publicly listed subsidiaries.

“For the first time, we now have standard metrics of sustainability across all Ayala companies covering human resource development, environment, and financials –the internationally recognized triple bottom line of sustainability,” the company said in a statement.

“This allows us to continuously measure and manage our sustainability efforts. Now that we have started measuring indicators in our business operations, our next steps will be to expand its reach into our supply chain and to design these more into products and services,” the company said.

Philstar

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